Insurers are used to fielding questions about premiums, coverages and claims. But lately, they’ve confronted a whole new set of queries: as the Canadian Council of Insurance Regulators’ (CCIR) market conduct statement deadline approaches (May 1st), they’re being asked to report fair treatment practices – on everything from point of sale information and product advertising to staff training.

Their answers will help create a clearer picture of the strengths and weaknesses in the way insurance companies treat customers. For personal lines P&C insurers, the statement marks the first national collaboration on market conduct practices. What’s more, the resulting data pool will mark a new stage in both regulatory and consumer protection efforts, says Brian Maltman, executive director at the General Insurance Ombudservice (GIO). “Now that [we have] the volume of data on companies and other consumer issues, we’ve got to get together to align it so we can all do our jobs better.”

Good news, bad news

Financial institutions already have a good track record on consumer treatment, according to the Financial Consumer Agency of Canada, which noted “strong market conduct” among financial services firms, including insurers, in its 2016 annual report.

In coordinating the new data pool, insurance regulators hope to solidify that performance. They want to understand the marketplace, find emerging risks and improve consumer protection, according to Patrick Déry, Canadian Council of Insurance Regulators’ (CCIR) chair. More broadly, the council also wants to gauge “the alignment of insurer practices in Canada with standards contained in the Insurance Core Principles (ICPs),” he says.

Those principles — determined by the International Association of Insurance Supervisors (IAIS) – set out global insurance supervision standards, and the association has highlighted point-of-sale communications, product design and “ineffective insurance culture” as areas needing improvement.

That sets out a specific challenge for insurers here, according to the authors of a 2016 KPMG International report, Evolving Insurance Risk and Regulation. “Good conduct is not simply about ensuring customer satisfaction but delivering a good outcome for the customer,” they state.

Under pressure: The consumer experience

What might better outcomes look like? Clearer communication should be a goal, agrees Maltman. His organization helps resolve disputes for roughly 4,000 insurance consumers a year. Even though “insurers are very good at walking their customers through this, and 95 percent of the time they get it right,” misunderstandings mar the remaining 5 percent, he notes.

The KPMG report notes the imbalance between what insurance professionals know versus what consumers know – and understand. That gap is most problematic in areas like policy limits, or what the policy actually offers, says Maltman. “There’s a lot of misunderstanding around that.” At present, products related to water damage are the ones creating friction, he adds.

Not surprisingly, claims are another sore point. Claims lead the number of calls to the GIO by a large margin — in 2015 — 2016, the organization fielded 2,066 claims-related calls compared to 476 calls about the next most common issue, policy cancellation, according to the organization’s latest annual report.

Lengthy loss adjustment processes often lead to communication breakdowns, Maltman points out. “The contractor is too busy and you end up with a stressful situation,” he says. “They’re not huge trends in terms of great numbers, but when they do happen, the effect is severe. And this is what regulators have noticed.”

Policy details are another sticking point. J.D. Power & Associates conducts regular insurance consumer satisfaction surveys, and although overall satisfaction for Canadian insurance shoppers is higher, Gregory Hoeg, vice-president of the company’s insurance practice, notes that they still report dissatisfaction with access to policy details or clarity on discounts.

Pricing also scores low satisfaction — an average of 702, which isn’t bad, since the highest score was 805 on a 1,000-point scale, but is still the lowest industry average for customer satisfaction, he points out. While “price is always where people are going to be least happy,” showing value in other areas of consumer treatment or fairness can help companies counteract that, he says.

Basic practices aren’t the only thing defining consumer experiences. Ongoing market consolidation can disrupt service as customers deal with a new, larger entity, Hoeg notes. And, the surge in natural catastrophes can strain claims and service staff.

In cases like the 2013 floods or last year’s wildfires, “insurers are overwhelmed,” says Maltman. Companies are in the midst of addressing new realities in property claims, another pressure in a field where fire used to be the biggest risk facing property owners, he points out. “There’s a big shift in mentality around that. Underwriters are working very hard, they can no longer look backward.”

Brokers at bat

The same market conduct issues might crop up from insurer to insurer, but there are “subtle” differences in how companies — or their brokers — address them. Direct insurers have trained customer service reps to respond on their behalf, but brokers have the added option to be an intermediary “who can and will go to bat for their insureds when they can,” says Maltman.

The CCIR’s market conduct requirements don’t set out specific measures for brokers, but fair treatment outcomes do apply to distributors, notes Dery. Along with legal and regulatory requirements, they should “provide high quality advice and clear information before, during and after the point of sale.”

That dovetails with brokers’ ongoing mission, says Insurance Brokers Association of Canada (IBAC) CEO Peter Braid. The market conduct statements won’t change the way brokers share information with their insurer partners, but he notes that the CCIR collaboration complements ongoing work. “Any efforts that bring clarity and transparency to the marketplace and ensures that consumers’ interests are best served aligns with our core mandate.”

In a trust-based business, a great deal of that trust lies with intermediaries, Hoeg stresses. “They’re critical, [being] the right people with the right expertise who can make something complex understandable.”

And in that, they can push fair treatment standards higher, adds Maltman. “What we have found in best practices in our work is to listen longer, empathize more and to search for more options that enable and empower consumers to become their own advocates.”

More data, better outcomes

With that in mind, the potential for the newly consolidated data is high, Hoeg notes. “As long as it’s structured properly and everyone understands what the information represents and doesn’t represent.”

Déry says the information will eventually yield co-operative plans for provincial supervisors, and other jurisdictions show where other gains lie: In the U.S., the National Association of Insurance Commissioners (NAIC) has collected Market Conduct Assessment Statements for the past six years, analyzing data on regional and local levels, according to NAIC staff. The collaboration “provides consistent, uniform comparisons of companies regarding underwriting and claims activities that cannot be otherwise collected in the financial annual statements or without a costly examination,” association staff told us.

Those findings have helped regulators pinpoint trouble spots and allocate resources as needed, they say. A 2015 NAIC report notes that Delaware has identified auto insurers with a pattern of issuing and rescinding policies within 60 days, as well as companies with a history of lawsuits. And, “with the MCAS data, we have clearly identified statewide fluctuations specifically related to storm-related activities which would not be the case if we attempted to compare to national averages,” the report states.

Some results are unexpected: a high number of policy cancellations noted at one company in New Hampshire led to an investigation. The result? Faxed policy forms were continually delivered to the wrong department — an administrative problem. Similarly, an insurer in Wyoming had a higher-than-average amount of unprocessed claims, which actually stemmed from gathering and formatting the market conduct statement information.

Any added transparency from market conduct results will also be helpful, Hoeg points out. That’s crucial for insurers, who don’t have a widget or obvious product that speaks for itself, he says. “To the extent that insurance companies can have very clear and transparent policies and procedures for handling information or interacting with insureds, the better they will do. It’s not just a way to win, it’s the right thing to do for the insurance business.”

It’s also in their best interest to showcase their merits beyond price, he says. “If they emphasize things like a better set of policy offerings or that customer satisfaction is superior to [other] companies, that will give them a leg up to capture more of the market.”

Competition aside, Maltman has already noticed a willingness to join forces on market conduct. He says ombudsmen from various insurers are often eager to share best practices at GIO meetings. That seems to underscore the power in consumer experience information, whether it comes from a spreadsheet or an anecdote, he says. “There is always room for improvement in a difficult situation.”